Fast Food

Subway's Fresh Offensive

Fast-Food-Kette Subway
Subway has a low profile in Germany compared to its worldwide ubiquity. Source: DPA

You’d be hard-pressed to find a country where Subway doesn’t have one of its sandwich shops. Whether on the Marshall islands, Zambia or the Dominican Republic, ordering a chicken teriyaki on your choice of bread is possible. With around 44,000 restaurants, the American sandwich chain is the world’s largest, with even more locations than McDonald’s.

But Subway has had a tough time in Germany. There are only 1,500 locations nationwide, after many franchisees stepped out of the business in 2010, citing high expenses, little profit and lack of accountability from the company. The chain attempted to get too big too fast, with the financial onus falling on franchisees, some of whom claim to have lost their life savings. Subway revenues sank and so did the number of total stores from 800 to less than 600.

In a 2014 interview with Handelsblatt’s sister publication Tagesspiegel, former Subway Germany head William Walker said that the company had managed to find new franchisees and many of the troubled locations had since become profitable.

And Subway might be poised for an even bigger bite out of Germany yet, thanks to a major development: a new partnership with Shell and its gas stations.

The cooperation, currently in trial phase, is starting with just two locations, and with a further 50 planned. According to Subway’s boss for Germany Hans Fux, it’s the perfect setup, as locations require no more than 15 square meters of operating space and the company doesn’t use large appliances like fryers or grease separators.

Gas station restaurants are a good business, considering travelers have limited options on the road. Shell’s competitor Aral has announced its own cooperation with supermarket chain Rewe in 1,000 stations after a successful trial run.

Fast food market leader McDonald’s has an agreement with highway services company Tank & Rast and is adding a double-digit number of new stores on the autobahn this year. Within the next five years, they plan to open around 100 restaurants at Tank & Rast locations.

Regardless of the new tie-up, Subway in Germany appears already to be on a growth spurt. Eight new sites have been added since January and the company has granted 12 new franchise licenses.

“In the first quarter, our sales grew by 7.5 percent,” said Mr. Fux. “We are developing better than the industry.”

He was reluctant to mention concrete figures, but according to Germany’s Hotel and Restaurant Association, Subway’s annual turnover is somewhere around €230 million, making it the seventh-largest company in Germany’s food industry.

 

Florian Kolf leads Handelsblatt’s coverage of the retail, consumer goods, luxury and fashion markets. To contact the author: kolf@handelsblatt.com

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